|TEV||-0||TEV/EBIT||0||TTM 2019-09-30, in MM, except price, ratios|
|Item 1. Financial Statements|
|Note 1 - Basis of Presentation|
|Note 2 - Going Concern|
|Note 3 - Incorporation of Subsidiary|
|Note 4 - Related Party|
|Note 5 - Capital Stock|
|Note 6 - Subsequent Events|
|Item 2. Management's Discussion and Analysis or Plan of Operation|
|Item 3. Quantitative and Qualitative Disclosures About Market Risks|
|Item 4. Controls and Procedures|
|Part II - Other Information|
|Item 1. Legal Proceedings|
|Item 1A. Risk Factor|
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds|
|Item 3. Defaults Upon Senior Securities|
|Item 4. Mine Safety Disclosure|
|Item 5. Other Information|
|Part II. Other Information|
|Item 6. Exhibits.|
|Balance Sheet||Income Statement||Cash Flow|
Rev, G Profit, Net Income
Ops, Inv, Fin
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer, "accelerated filer," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
Table of Contents
FREE FLOW, INC.
Cash in hand and bank
Trade Receivables - current
Other Receivables - Staff /Intra-company
Rounding off decimal error
Advance for Inventory Purchases
Deposit for Sales' leads
TOTAL CURRENT ASSETS
Land and Building
Less: Accumulated depreciation
TOTAL FIXED ASSETS
Delivery Trucks, at cost
Less: Accumulated depreciation
TOTAL OTHER ASSETS
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Notes payable - related parties
TOTAL CURRENT LIABILITIES
Long Term Liabilities
Loan - secured
Line of Credit
TOTAL LONG TERM LIABILITIES
Redeemable Preferred Stock
Preferred stock ($
Additional Paid in capital
Common Stock, ($
Additional paid-in capital
Current Period - Profit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
TOTAL LIABILITIES & STOCKHOLDERS' (DEFICIT)
The accompanying notes are an integral part of these financial statements
Free Flow, Inc.
Statements of Operations
COST OF GOODS SOLD
GENERAL AND ADMINISTRATIVE EXPENSES
General & Administrative Expenses
OTHER EXPENSES (INCOME)
Net Profit (Loss)
NET PROFIT (LOSS)
BASIS INCOME (LOSS) PER SHARE
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
FREE FLOW, INC.
Statement of Changes in Shareholders' (Deficit)
Balance, December 31, 2019
Profit for the quarter ended March 31, 2020
BALANCE, MARCH 31, 2020
FREE FLOW, INC. & SUBSIDIARY ACCURATE AUTO PARTS, INC.
Statements of Cash Flow
CASH FLOW FROM OPERATING ACTIVITIES
NET PROFIT (LOSS)
(Increase) in Other Assets
Increase in Trades Payable
(Increase) Advance for Inventory Purchases
(Increase) Trade Receivables
(Increase) Decrease in Inventory
NET CASH USED IN OPERATING ACTIVITIES
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from notes payable - related parties
Proceeds from Line of Credit
Proceeds from Pay Pal Advance
Proceeds from Loan from River Valley Bank
Proceeds from Subscription Money
Rounding off the decimals - error
(Increase) in Fixed Assets - Land, Building
Proceeds from Accounts Payable - trade (Decrease in Accounts Payable)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN CASH
CASH AT BEGINNING PERIOD
CASH AT END PERIOD
Free Flow, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2020
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on April 10, 2020.
NOTE 2 - GOING CONCERN
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has established itself as a stable ongoing business entity with established revenues sufficient to cover its operating costs and allow it to continue as a going concern. However, the ability of the Company to continue as a going concern is also dependent on the Company obtaining adequate Sales so that the Company can liquidate its inventories and continue as a going business.
In order to continue as a going concern, the Company will need, among other things, Sales of its product lines. Management has obtained such sales through Internet sales and marketing companies who specialize in promotion of such businesses. Management is no longer obtaining capital from management and significant shareholders to meet its minimal operating expense and is meeting such expenses from cash flow from sales. However, management cannot provide an assurance that the Company will be continue operating successfully in accomplishing any of its plans, especially in view of un-certain circumstances prevailing due to COVID 19.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually fulfill the secured purchase orders to attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 – INCORPORATION OF SUBSIDIARY
In February 2015, the company incorporated a subsidiary, Promedaff, Inc. and purchased a skin care product line and formulations for $
buyers overseas who have already signed letter of intent to purchase 3,000 metric tons of shredded steel per months. Progress discussed below under “Plan of Operation” in section marked “Item 2”.
As reported in 10Qs for the earlier quarters as well as in 10Ks for the Annual reports, on February 4, 2016 the company incorporated another subsidiary in the State of Virginia under the name JK Sales, Corp. (on December 7, 2017 the name was changed to Accurate Auto Parts, Inc.) and has since remained in the business of buying end of life and salvage vehicles and selling auto parts.
On April 17, 2018 the company incorporated in Virginia, another subsidiary named Accurate Investments, Inc. with the objectives of acquiring real estate property, which plan did not materialize. Accurate Investments, Inc. has pursued other business opportunities that are discussed under subsequent events in note 6 below.
On January 4, 2017 the company incorporated in Virginia another subsidiary named City Autos, Corp. with the objective of operating a auto dealership but this entity remained inactive due to lack of qualified personnel. The company is now in the process of negotiations with a qualified operator and expects to begin the licensing process in very near future.
NOTE 4 – RELATED PARTY
As of December 31, 2019, the Company had notes payable in the amount of $
NOTE 5 – CAPITAL STOCK
The Company has authorized
Pursuant to the resolution of the shareholders meeting held on March 30, 2015 the Company designated
a)Each share to carry one vote.
b)Each share will be redeemable with a 365 days written notice to the company.
c)Each share will be junior to any debt incurred by the Company.
d)The redemption value will be the par value at which such “preferred shares – series B” are bought by the subscriber.
e)Each share will carry a dividend right at par with the common shares.
On December 31, 2014 the Company had a Note outstanding in the principal amount of $
On March 31, 2015 an amount of $
On March 31, 2017 total preferred shares issued and outstanding are
On December 31, 2018 the Company had a Note outstanding in the principal amount of $
On April 2, 2019, the Company accepted subscription in the amount of $
NOTE 6 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date which the financial statements were available to be issued. Based on the evaluation there occurred a material event that require recognition in or disclosure to the financial statements. The Company has received confirmation from the bank that has made loan against the property and has made available a working line of credit that it will freeze payments of mortgage and interest on both loans for a period of six month beginning April 2020. In addition to this accommodation the bank has also confirmed availability of $27,800 of loan under the Paycheck Payment Program for a period of two years at an annual interest rate of 1%.
The Company is still open for business, but the sales are down by more than 50%.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED FINANCIAL STATEMENT SAND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING CERTAIN FORWARD LOOKING STATEMENTS IN THE FLOWING DISCUSSION AND ELSEWHERE IN THE THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR AN BEHALF, WHETHER OR NOT IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, FORWARD-LOOKING STATEMENTS ARE STATEMENT NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS. FORWARD-LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE, THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FORM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE BY, OR ON OUR BEHALF, WE DIS TO UPDATE FORWARD-LOOKING STATEMENTS.
PLAN OF OPERATION
Accurate Auto Parts, Inc. the Company’s used auto parts subsidiary continues its business to purchase end of life and wrecked vehicles and grow its business.
Motors & Metals, Inc. the Company’s subsidiary for processing of scrap metal, upon receiving a revalidation of its zoning from the Town Authorities applied for State license to operate as “Scrap Metal Processor”. This was granted in early January of 2020; it is worth mentioning here that the Company already had such license under its subsidiary namely Accurate Auto Parts, Inc. The State enacted new regulations whereby auto recycling facilities could no longer operate as “scrap metal processor” thus the Company opted to apply for another license independent of Accurate Auto Parts, Inc.
Thereafter, the management began its process to contact machinery manufactures in the USA and abroad, several offers and indication have been received. The CEO made arrangements to visit a few existing plants in the USA through the arrangements made by the leading machinery manufacturers. Also, a few plant manufacturers made physical visit to the company location to evaluate the environment and logistics. The company then retained the services of a qualified consultant/executive with several years of experience in management and production of such facilities in the USA.
Feasibility report has been prepared and comparative analysis has been conducted to arrive at the most practical conclusion. It has thus been determined that the Company will to go ahead and expand its scrap metal processing.
Financial arrangements for capital expenditure are being sought, in view of the positive forecasts of earnings and sales, the Company expects that financing will be available.
RESULTS OF OPERATIONS
The Company did recognize revenue for a sum of $116,379 during the three months ended March 31, 2020 and $58,784 of revenues during the three month ended March 31, 2019. While the net revenues for the period ended March 31, 2020 were higher by $ $57,595 than for the same period during 2019, the Cost of Goods Sold was also higher by $8,850 during the period ended March 31, 2020 as compared to the same period during 2019. The general and administrative expenses for the period ended March 31, 2020 were $121,112 as compared to $68,418 for the same period during 2019. The additional sum of $52,694 is attributed to additional costs and expenses that have been incurred for hiring additional production and management employees.
During the three months ended March 31, 2020 the company recognized a net profit of $25,214 as compared to a loss of $34,405 for the corresponding period in the year 2019, thus recognizing a significant increase in profit as compared to the three months ended March 31, 2019.
The increase in profits is a result of an increase in sales and a reduction in cost of sales due to better controls and improvement in efficiency of dismantling.
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S REPORT ON THE COMPANY’S FINANCIAL STATEMENTS AS OF DECEMBER 31, 2019, AND FOR EACH OF THE PRECEDING YEARS THEN ENDED, INCLUDES A “GOING CONCERN” EXPLANATORY PARAGRAPH, THAT DESCRIBES SUBSTANTIALLY DOUBT ABOUT THE COMPANY’S ABILITY TO CONTINUE AS A GOING CONCERN.
On March 31, 2020 the Company had total current assets of $1,695,858 consisting of $10,141 in cash and $77,563 in trade receivables, $840,156 in inventory of auto parts, $28,000 as advance for purchase of automobiles, and $20,000 deposit for leasing data base for leads of prospective clients; as compared to March 31, 2019 which were: total assets of $615,971 consisting of $2,775 in cash and $18,526 in trade receivables, and $594,670 in inventory comprising of automobile parts and accessories.
LINE OF CREDIT RECEIVED AND FURTHER ANTICIPATED
The Company does have cash sufficient to meets its cash needs. Incredible Bank (f/k/a River Valley Bank), extended a line of credit for a sum of $350,000 for working capital. If market conditions had remained the same and no adverse circumstances had occurred the company was adequately funded to meet its budgeted plan of operations, but now due to Coronavirus the Company is uncertain if its existing cash flow will suffice the cash requirements. The Company has substantial surplus value in its inventory and in the land it owns; thus an additional loan/line of credit might be justified.
The Company recognizes revenues on arrangements in accordance with Securitas and Exchange Commission Staff Accounting Bulletin Topic 13, REVENUE RECOGNITION and FASB ASC 605-15- 25, REVENUE RECONGNITION. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonable assured. The Company reported gross revenues of $340,148 for the year ending December 31, 2017.
Management's Report on Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control so as to
(1) maintain the records in reasonable detail, which will accurately and fairly reflect the transactions and dispositions of the Company's assets;
(2) to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are made within the delegated authority ; and
(3) to provide reasonable assurance for the prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on company’s financial statements.
However, the management asserts that the company did not have any accounting staff due to limited financial resources though now has plans to recruit gradually. Also, this company does not have a well written document on accounting policies and procedures, though has plans to have them shortly. Consequently, this can result in possible errors in the presentation and disclosure of financial information in our annual, quarterly, and other filings.
The SIC Code of 1700 as showing in Edgar for this company is no longer valid, since this company is now dealing with the auto parts, as OEM Recycled Auto Parts. Segregation of duties is an important factor in Internal Control. Though it is achieved to a certain extent, the management is committed to strengthen the internal controls effectively in the coming months.
The company promoted two of its senior managers to become executive directors thus taking on greater responsibilities and deserving greater rewards. Both of these individuals have over 25 years’ experience in auto parts industry.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the period ended March 31, 2020, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II – OTHER INFORMATION
Not Applicable to Smaller Reporting Companies.
During the period of January 1, 2015 and March 31, 2015, the Company issued 9,700 shares of Preferred Shares – Series “A” for a sum of $58,000 and 330,000 shares of Preferred Shares – Series “B” for a sum of $330,000 which were the result of conversion of certain debts of the company.
During the period of April 2019 the Company accepted a subscription of $14,490 against issuance of 21,000 restricted common shares.
PART II. OTHER INFORMATION
The following exhibits are included with this quarterly filing. Those marked with an asterisk and required to be filed hereunder, are incorporated by reference and can be found in their entirety in our original Registration Statement on Form S-1, filed under SEC File Number 000-54868, at the SEC website at:
101 Interactive data files pursuant to Rule 405 of Regulation S-T
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated May 12, 2020
By: /s/ Sabir Saleem
Sabir Saleem, Chief Executive Officer,
Chief Financial and Accounting Officer